Specialist finance is an increasingly exciting area of borrowing and money lending that is growing rapidly in the UK. 

This refers to any type of non-bank financing and ways of raising money without going to a traditional high street – but rather a private institution, challenger bank or tech company.

Specialist finance is commonly used today for funding businesses, buying property and offering short term finance to borrowers.

To give an indication of growth, the bridging finance industry (a perfect example of specialist finance) was worth £1 billion in 2011 and ten years later is valued at £7 billion. Another specialist finance player in Zopa, completed its IPO last week at a valuation of £1 billion.

The trend is real – from consumers moving from Santander to Starling Bank and Metro Bank to Monzo – we delve a little deeper to find out what specialist finance is, why people use it and what are the types available to you and your business.

What is Specialist Finance?

Specialist finance largely refers to any type of funding or finance which is not from a bank. Whilst your high street bank used to be your first port of call for any type of loan, bank account or savings account, the British consumer is adopting more alternative companies and this includes startups and tech companies. 

In many cases, specialist finance companies can offer more incentives for signing up, such as welcome bonuses and offers for free – and more innovation and tech in terms of budgeting, saving money or getting faster access to finance. 

Specialist finance includes but is not limited to bridging, development finance, mezzanine funding, senior debt, peer to peer lending, invoice factoring and more.

Why is Specialist Finance Becoming So Popular?

The turning point for specialist finance was an outcome of the financial credit crisis in 2008. From this point, mainstream banks became very restrictive in terms of who they lent money to – from businesses to regular joes on the street looking to get a mortgage.

The process of getting approved for a loan or mortgage has become far more difficult and this remains the case today.

This has given rise to specialist finance which are likely to be run by more forward-thinking entrepreneurs who can offer strong USPs and are more likely to take a view on individuals, small businesses and more individual circumstances such as being self-employed or with bad credit ratings.

What Are The Types of Specialist Finance for …

Buying Property

Bridging finance is one of the fastest growing areas of specialist finance which allows people to borrow money to purchase a property under a tight deadline. Whilst the property is used as security, bridging finance allows you to become a cash buyer and complete the sale of the property immediately. Most bridging loans are completed within 2 to 4 weeks, with the option to repay over 3 to 24 months – hence this type of finance is usually short term.

Similar options are available to help people complete on properties, whether it is for personal or investment purposes. This included development finance which is used to buy plots of land and the construction costs associated with them. There is also mezzanine finance and senior debt, which allows you to borrow money for more high-risk projects, whilst giving a small percentage to the lender too.

For Startups

Specialist finance exists in many forms for startups – whether it is using crowdfunding platforms, challenger banks or asset backed lending. 

For many startups, a specialist finance lender can offer a lot of advantages over a bank. With traditional banks likely to be more restrictive, a specialist firm can be more open to working with new companies and offer loans using security, future invoices, purchase orders and more.

Above all, specialist companies will take a view on individuals regardless of their history or background, looking at the particular opportunity and its potential.

For Working Capital

Working capital is key for many businesses that suffer with cash flow issues and need money upfront to keep their business running.

Invoice finance is commonly used by caterers, food stockists, fashion companies and those selling high volumes of goods, since it allows them to receive money upfront on unpaid invoices. With up to 80% available upfront, this can be used for paying for stock, hiring staff and completing any jobs until the invoice is eventually paid to you in full.

Similarly, construction finance is a type of specialist finance used for construction firms who may get paid 50% upfront and then 50% upon completion. The role of finance can help pay for any working capital, materials and expertise to complete the job and stay on top of cash flow.

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